Club Owners Should Be in Compliance with Labor Laws to Prevent Litigation

Recently, many fitness facilities have faced class-action lawsuits related to the federal labor laws in the Fair Labor Standards Act (FLSA). Unfortunately, many club owners think they are in compliance with these laws, but some little-known applications of the laws are being exploited by attorneys.

Many of these lawsuits commonly apply to tennis pros, group exercise instructors and personal trainers. The following three areas seem to be of particular focus for plaintiffs’ lawyers:

1. Overtime. Club employees who are not managers (as specifically defined in the FLSA and who are exempt from overtime rules) are entitled to be paid time-and-a-half of their regular rate of pay for all hours worked in excess of 40 hours per week. Therefore, a tennis pro who is paid $40 per hour for lessons taught would be entitled to $60 per hour for any time worked over 40 hours per week. Obviously, if club owners want to avoid paying overtime, they must carefully monitor teaching hours to ensure that no one works more than 40 hours, but doing so can be difficult because of off-the-clock work.

2. Off-the-clock work. The law provides that any non-exempt employee who is doing work off the clock, whether at the employer’s premises or at an off-site location, is entitled to be paid for that work, even if the employer did not request that the work be done. Examples of off-theclock work brought up in lawsuits include time spent talking with members after a lesson, making scheduling or placement phone calls and completing paperwork. In general, employees may not volunteer to do the work without the employer paying for the time.

Under the law, this work is compensable at the employee’s regular rate of pay, so club owners could potentially be liable to pay an employee $40 per hour to fill out paperwork or make phone calls. According to the FLSA, time spent doing work not requested by the employer, but still allowed, is generally hours worked. It is assumed that the employer knows or should know that the employee is continuing to work and that the employer is benefitting from that work. Therefore, if an employee is in the club between lessons or classes and is (or might be) engaged in any type of work-related activity, that time is considered off-the-clock work. When off-the-clock work is added to hours actually worked, the issue of overtime becomes even more significant. Accrued off-the-clock hours can quickly accumulate, and when added to hours actually worked, they can result in costly wage liability (at the rate of time-and-ahalf) for the club owner.

3. Spread of hours. In some states with labor laws that apply in addition to the FLSA, lawsuits have focused on those state laws. One area of concentration here is spread of hours. These laws provide that an employee who works a spread of hours greater than 10 hours in any working day is entitled to one extra hour of pay at minimum wage. For example, if a trainer starts work at 7 a.m., has time off midday and then works again in the evening from 7 p.m. to 9 p.m., the spread of hours is from 7 a.m. until 9 p.m. Those 14 hours would entitle that employee to an extra hour of pay at minimum wage. The cumulative effect of the spread of hours pay could be quite costly for club owners.

Every pay period, your staff should sign off on all hours worked, including agreed-upon fringe hours for preparation. You also may be able to pay your staff as commission employees to avoid overtime. (More than 50 percent of the total compensation has to be on commission.)

After speaking with some club owners who have been involved in recent employee lawsuits and hearing what they learned about how to be in compliance with these laws, I encourage you to seek legal counsel to ensure your club is in compliance.

You also can put an arbitration clause in all of your employment contracts that has employees waiving the right to join a class-action suit and agreeing to arbitrate instead of litigate.

Club owners should be aware of the risks and exposure of these areas of litigation, consult labor law counsel and establish policies to minimize the risks and potential liabilities.

BIO

Ed Tock is a partner with REX Roundtables, which runs roundtables for business owners and chief executives. As a consultant, he has worked with more than 1,000 clubs since 1983. He can be reached at 845-736-0307.